2022 (3) TMI 394 - AAR - GST

Concessional rate of GST - works contracts - execution of works for Telangana State Industrial Infrastructure Corporation Limited (TSIIC) - Government entity or not - GST at 12% as prescribed in of S. No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended or not - appropriate rate and classification of GST - HELD THAT - TSIIC being wholly owned by Government of Telangana qualifies to be a Government entity under this definition. The Memorandum of Association of TSIIC at clause III(a)(3) clearly states that the company pursues the objectives to implement the schemes of incentives, subsidies and the like formulated by the Government of Telangana or Government of India or other authorities or institutions and to administer such schemes of incentives from time to time in the interest of establishments and development of industries. Thus TSIIC organization works to further the policies of the State Government, Central Government and Local Government for development of industries in the State of Telangana - the works contract executed by the applicant for construction of IT towers for TSIIC falls under exception to Sr No. 3(vi) of Notification No. 11/2017-CT (Rate) wherein the civil structure is meant for commerce/industry or any other business and therefore the supply of this service is taxable at the rate of 9% under CGST SGST each.

Summary

Issues:
1. Eligibility for concessional GST rate at 12% for services provided to a Government entity.
2. Appropriate rate and classification of GST to be charged for services provided to a Government entity.

Eligibility for Concessional GST Rate at 12%:
The applicant, a construction company, sought clarification on whether they were eligible for the concessional GST rate of 12% for services provided to a Government entity, specifically the Telangana State Industrial Infrastructure Corporation Limited (TSIIC). The applicant argued that since TSIIC is owned by the Government of Telangana with over 90% equity share capital, they should qualify for the lower tax rate. The Authority for Advance Ruling (AAR) analyzed the definition of a "Government entity" as per relevant notifications and found that TSIIC met the criteria, being wholly owned by the Government of Telangana. Consequently, the AAR determined that the applicant was not eligible for the concessional rate of 12% but should charge GST at 9% under both CGST and SGST.

Appropriate Rate and Classification of GST:
Regarding the appropriate rate and classification of GST to be charged by the applicant for the services provided to TSIIC, the AAR examined the nature of the works contract executed by the applicant. The AAR noted that the construction of IT towers for TSIIC constituted a civil structure meant for commerce, industry, or business, falling under an exception to the concessional rate provision. Therefore, the AAR ruled that the supply of services for the construction of IT towers for TSIIC should be taxable at the rate of 9% under both CGST and SGST. The ruling clarified that the civil structure's intended use for commerce/industry/business determined the applicable GST rate, leading to the decision to charge 9% under both CGST and SGST for the services provided.

This detailed analysis of the judgment by the Authority for Advance Ruling in Telangana provides a comprehensive understanding of the issues related to the eligibility for concessional GST rates and the appropriate GST rate and classification for services provided to a Government entity, specifically in the context of construction works contracts executed for TSIIC.